A housing bubble refers to a period of unsustainable and rapid increases in real estate prices, often fueled by speculation, excessive demand, and easy access to financing. This phenomenon is characterized by a surge in home prices well beyond the levels justified by economic fundamentals such as income growth, employment, and demographic trends. When the bubble bursts, home prices can sharply decline, leading to negative economic consequences.

Key characteristics of a housing bubble:

1. **Sharp Price Increases:** During a housing bubble, home prices experience rapid and often unsustainable growth over a relatively short period. Speculative buying, low interest rates, and other factors can contribute to this surge.

2. **Speculative Activity:** Speculators, who buy properties with the expectation of selling them at a profit rather than for personal use, often play a significant role in fueling a housing bubble. This speculative activity can contribute to an overheated market.

3. **Easy Access to Credit:** The availability of easy credit and lax lending standards can contribute to a housing bubble. When financial institutions provide mortgages to borrowers with weak credit or without thorough assessments of their ability to repay, it can lead to excessive borrowing and buying.

4. **Overbuilding:** In some cases, a housing bubble is accompanied by overbuilding, where developers construct an excess supply of new homes in anticipation of continued price appreciation. When demand slows, this oversupply exacerbates the downturn.

5. **Media Hype:** Media coverage and public perception can play a role in amplifying a housing bubble. Positive news about the real estate market and widespread belief in perpetually rising prices can attract more buyers, contributing to the speculative frenzy.

6. **Economic Consequences:** When the bubble bursts, home prices can sharply decline, leading to financial losses for homeowners, lenders, and investors. The aftermath may include a wave of foreclosures, financial instability, and a negative impact on the broader economy.

7. **Government Intervention:** In response to housing bubbles and their potential economic fallout, governments and central banks may implement measures to cool down the real estate market. This can include tightening lending standards, increasing interest rates, or implementing regulatory reforms.

Notable examples of housing bubbles include the United States in the mid-2000s, where the housing market played a significant role in the global financial crisis of 2008. Other countries, such as Spain and Ireland, also experienced housing bubbles during this period.

It’s important to note that not all periods of rising home prices necessarily indicate a housing bubble. Economic fundamentals, including factors like population growth, employment, and income levels, should be considered when assessing the sustainability of price trends in the real estate market.